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House of Lords

Tuesday, 31 January 2012.

2.30 pm

Rail: Great Western Passenger Franchise

Question

2.36 pm

To ask Her Majesty's Government whether they will ensure that the new Great Western passenger franchise provides the capacity and service quality to meet the expected growth in passenger numbers.

Earl Attlee: My Lords, on 22 December, the Department for Transport launched a consultation on the new Great Western franchise. The consultation document contains the Government's objectives for the new franchise. These include: providing appropriate capacity for passenger services that is both affordable and delivers value for money for the taxpayer within defined infrastructure and rolling stock constraints on the Great Western network; and ensuring that the overall passenger experience improves throughout the life of the franchise.

Lord Berkeley: I am grateful to the noble Earl for that Answer. I have read the document to which he referred and good things are certainly said about the problem of overcrowding. However, he will be aware that according to government statistics eight of the 10 most crowded trains are on First Great Western, and there have been serious overcrowding problems at Bristol and in Cornwall. Given that there will be a long franchise and that the number of passengers may greatly increase, how will the Government incentivise the successful franchisee to run more coaches or trains so that it does not have to go to the Treasury begging for more money?

Earl Attlee: My Lords, I entirely agree with the noble Lord on his analysis of the overcrowding problems on the current franchise. He will be aware that the difficulty with the current franchise is that it does not incentivise the operator to increase capacity. However, there will be significant capacity increases, especially with the introduction of the IEP train.

Lord Touhig: My Lords, will the successful bidder for the franchise be required to provide new rolling stock? As a regular user of the service, I can testify to delayed and cancelled trains because of mechanical failure, sweltering or freezing carriages because air conditioning does not work, lavatories blocked or flooded, and on one train that I travelled on recently the brakes seized and part of the train had to be evacuated because of appalling fumes that filled the carriages. The one redeeming feature of the present

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operator is that it has excellent on-train staff, who have a difficult job working for a company that for many of us is still known as "Late Western".

Earl Attlee: My Lords, the bidders are able to take into account the condition of the rolling stock when they bid, with the exception of the IEP rolling stock, which they have to adopt. We need to avoid telling the bidders which rolling stock they have to use because otherwise that would compromise their negotiations with the ROSCOs.

Lord Snape: My Lords, will the Minister consider something revolutionary so far as this and other franchises are concerned? The franchisee should set the fares, tackle overcrowding and run a proper financial risk for the length of the franchise; under the present system, the Government set the fares, the leasing companies own the trains and, if anything goes wrong, the so-called franchisee hands in the keys and the taxpayer picks up the Bill. Does he agree that, whatever system we have at the moment for running trains, franchising it certainly ain't?

Earl Attlee: My Lords, I hope that the noble Lord contributes to the consultation, because he makes some valid points.

Lord Bradshaw: My Lords, will the Minister address his mind to the fact that, on many of the franchises throughout the kingdom, the carriages in use are full to overflowing, but the Department for Transport holds the trump card in the acquisition of new rolling stock, because it has to give permission before that can be done? Under the new franchise, does he envisage that whoever wins it or other franchises will have reasonable freedom to negotiate, without the dead hand of the department?

Earl Attlee: My Lords, the reason why it is necessary for the department to have the final say is so that it could take over the franchise and run the rolling stock. The noble Lord, Lord Snape, talked about the franchisee handing in the keys. Franchisees might want to do that if they negotiated a rolling stock agreement that had a balloon payment right at the end. Obviously, the department would refuse that. We are very keen that bidders are able to negotiate freely with the rolling stock companies, with the exception of the IEP, on this franchise.

Lord Wigley: My Lords, will the electrification proposals have an adverse temporary effect on capacity on the lines? In that context, will the Minister give an assurance that the Government will still consider electrification of the Great Western line through to Swansea?

Earl Attlee: My Lords, on the noble Lord's first point, he is absolutely right that there will be disruption on services from Paddington due to the electrification, but it is obviously worth doing. On the wider point about electrification from Cardiff to Swansea, we shall have to wait to see.

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Lord Rosser: My Lords, an issue raised by train operators is that, as the noble Lord, Lord Bradshaw, said, if they want to increase rolling stock capacity to meet extra demand, they have to secure the approval of the Department for Transport either to use existing rolling stock more intensively or to lease additional rolling stock from the leasing companies. The approval of the Department for Transport is also required before train operators can speed up scheduled services following improvements to the infrastructure. Will the Government make provision in the new Great Western passenger franchise and in existing and other new franchises to enable the train operator to make such changes in future, subject to the other terms of the franchise remaining the same, without having to go through the, at times, time-consuming and lengthy procedure for obtaining prior approval from the Department for Transport?

Earl Attlee: I think that the noble Lord broadly describes some of the difficulties of franchising. We will have to see what the result of the consultation is.

Baroness O'Cathain: My Lords-

Lord Walpole: My Lords-

Baroness O'Cathain: My Lords, in view of the disconnect that seems to exist between the passenger experience and the views of the Department for Transport, would it not be a good idea if the 50 most senior members of the Department for Transport had it within their remit that they have to travel on the "Late Western" line at least once a month?

Earl Attlee: My Lords, I do not think that would be a practical requirement. However, one objective of this franchising round is to ensure that the overall passenger experience improves throughout the lifetime of the franchise.

Individual Savings Accounts: AIM Shares

Question

2.44 pm

Asked by Lord Northbrook

To ask Her Majesty's Government whether they will reconsider their decision not to allow shares traded on the Alternative Investment Market to be eligible for Individual Savings Accounts.

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, individual savings accounts, or ISAs, are the Government's main tax incentive for non-pensions savings, and they offer a simple, straightforward and trusted brand. The Government believe it is important that ISAs continue to hold these characteristics. AIM shares tend to present a higher level of risk, and can be less liquid. For those reasons, the Government do not intend to make them an eligible investment for the ISA wrapper.

Lord Northbrook: My Lords, I thank the Minister for his Answer, which once again is disappointing. I thought that the policy of the coalition Government was to encourage personal choice and, indeed, investment

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in our smaller and growing companies. The arguments for including AIM stocks in ISAs are very strong. They are supported by the Stock Exchange and the Quoted Companies Alliance, as they were by noble Lords on all sides of the House when the question was raised a year ago. Their eligibility would widen the shareholder base, improve liquidity and facilitate fund-raising. What is the logic of AIM stocks being included in SIPPs but not in ISAs?

Lord Sassoon: My Lords, this is a Question that we come back to on a regular basis and my answers are going to sound boringly repetitive. I see the noble Lord, Lord Myners, in his place. He answered this Question in the dying days of the previous Government. The simple fact is that the ISA is a trusted brand in which more than 23 million adults-45 per cent of the adult population-hold shares, and we need to protect that trusted brand and the suite of products within it. On the other hand, the Government have taken a range of measures to support small businesses. In relation to SIPPs, the liquidity requirements of an ISA with a 30-day withdrawal period, in particular, are very different from what might be the case when locking up shares for the long term in a pension savings product.

Lord Peston: My Lords, I think that I understand the noble Lord's answer but surely the main criterion that ought to be applied to ISAs is: do we have a system that maximises people's propensity to save using ISAs? If it can be demonstrated that the Alternative Investment Market will do that, even if it is more risky-and, incidentally, people ought to know that all investments are risky-surely it still makes sense for the Government to widen the range of assets, assuming that that encourages people to save.

Lord Sassoon: My Lords, I am very happy to confirm that ISAs have indeed been a very successful product. As I said, 45 per cent of the population over the age of 16 hold them. On the latest numbers that I have seen, the total value of ISAs is £350 billion. It was a successful initiative of the previous Government. It is the main savings product of a large part of the population and we should not do anything to undermine the value of that brand.

Lord Lee of Trafford: Can my noble friend name any organisation, any professional body or any serious investment commentator that supports the Government's policy?

Lord Sassoon: My Lords, it depends what question they are asked and what the considerations are. I can see that lots of people have an interest in wanting AIM shares to be eligible for ISAs. However, I suspect that if they were also asked whether they wished to see AIM shares lose some of the tax benefits that they have in the way of eligibility for enterprise investment schemes and venture capital trusts and particularly the inheritance tax advantage that comes with their status as business property relief, they might not be so keen on this change.

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Lord Campbell-Savours: My Lords, would the Minister care to remind the House of the scale of the collapse of companies on the AIM market? Perhaps I may say that I support the Government's position.

Lord Sassoon: My Lords, the AIM market has been very successful, and I do not want to say anything to suggest that it is not. However, it is true that the number of shares on that market has come down from a peak of about 1,700 to the current figure of about 1,140, and of course there has been a similar decline in the value of the market. Therefore, it is a successful market but one that has a range of much smaller shares within it.

Lord Forsyth of Drumlean: My Lords, I should declare my interest as a director of an AIM-listed company. Is not the cost the real reason that my noble friend is not prepared to agree to this proposal? How is that consistent with the Government's declared policy of wanting to encourage investment in small businesses and start-up companies in order to get the growth in our economy which is desperately needed?

Lord Sassoon: My Lords, first, I explained the reasons why the Government decided-as the previous Government rightly did-not to make AIM shares eligible. On the other hand, I am happy to summarise some of the measures to support small businesses that the Government are taking-for instance, credit easing, with up to £20 billion of lower-cost lending; £1 billion through the business finance partnership for mid-sized companies through non-bank lending channels; greater tax relief for EIS and VCT schemes; more than £500 million going into venture capital funds, including through business angel co-investment funds; and the extension of the enterprise finance guarantee. I could go on.

Lord Eatwell: My Lords, the noble Lord referred to the problem of devaluing the brand by including riskier assets. To what degree was the brand devalued when ISAs were extended from cash ISAs to share ISAs?

Lord Sassoon: My Lords, it is entirely appropriate, because ISAs are the main savings vehicle for people in this country, that a range of products, both cash and equity and debt products, should be eligible for an ISA. As I explained, there is an appropriate line to be drawn, and it is where the previous Government and this Government drew it. This Government are fully continuing on AIM with the previous Government's policy.

Lord Barnett: My Lords, I declare an interest as a holder of ISAs who has no desire to invest in AIM. The noble Lord, Lord Forsyth, made a major point to which the Minister did not reply. It is totally inadequate to keep saying that the Government are not going to do it. Will the Minister not at least reconsider it?

Lord Sassoon: My Lords, there are no plans to reconsider it. My noble friend Lord Forsyth put up another possible reason why the Government might

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not want to make the change. I said that the Government were not making the change for the reasons that I first gave.

Legal Aid

Question

2.52 pm

Asked By Lord Bach

To ask Her Majesty's Government what assessment they have made of the implications of legal aid cuts for law centres.

The Minister of State, Ministry of Justice (Lord McNally): My Lords, the equality impact assessments lay out the best estimates of the likely costs and benefits of the reforms. The equality impact assessment considers the financial implications for not-for-profit providers, of which law centres are an example.

Lord Bach: My Lords, I thank the Minister for his reply. Everyone agrees what a vital and civilising role law centres perform around our country. Everyone agrees that early legal advice solves problems, helps people, changes lives and often saves costly and unnecessary cases going to court. The effect of taking social welfare law out of scope will be to reduce the funding for legal help by law centres by 85.8 per cent. Law centres will inevitably close and many thousands of people, often the poor and marginalised, will be left without access to justice. Even the TaxPayers' Alliance chairman wrote:

"Almost everyone who has looked at these particular cuts thinks that too many of them will end up costing taxpayers more than they save".

Does the Minister agree with that analysis, and would it not be an absurd and wrong result if we should end up spending more public money in order to make our country less just and less civilised?

Lord McNally: My Lords, the noble Lord will not expect me to agree with that analysis, which has been his constant theme during the passage of the LASPO Bill, and I suspect will continue to be, based on a worst-case scenario. We are restructuring legal aid and that will have an impact on the not-for-profit sector. We have never resiled from that. However, we also appreciate the benefits of the not-for-profit sector, which is why we provided £107 million in transitional funds and an additional £20 million to help the sector restructure for the new framework of legal aid and legal services that the reforms are intended to bring about. I do not accept the worst-case scenario that has been the basis of the noble Lord's arguments throughout the passage of the Bill.

Lord Mackay of Clashfern: My Lords, does my noble friend agree that the law centres are probably the most efficient and economical way of providing advice for those who are not particularly well off but who really need advice?

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Lord McNally: I thank my noble and learned friend for that helpful question-he is making a habit of helpful interventions. Of course we do, and nobody doubts that. That is why, as I said before, we have provided funds for this transitional period and why my honourable friend Nick Hurd is at this moment making attempts to identify funding that will give the not-for-profit sector a better long-term future. Nobody denies, underestimates or fails to appreciate the benefits of the not-for-profit sector. The key is how it will adjust to the new structure of legal services that we are bringing about by these reforms.

Lord Howarth of Newport: My Lords, is equality before the law not a basic liberal principle? Why has the coalition abrogated it?

Lord McNally: It has not.

Lord Phillips of Sudbury: My Lords, does the Minister accept that the Law Centres Federation expects several urban law centres to close? Where are the distressed people who have hitherto got essential advice from those law centres going to go? Secondly, if the Minister is inclined to say that they can use the telephone helpline that we propose to set up, would he not accept that many of the people in most need of basic welfare law advice, which is often hugely complicated, are inarticulate and unable to access the advice they need on a telephone helpline?

Lord McNally:Again, my noble friend quite often intervenes to ask a question and then provides part of the answer. Yes, part of the answer is the electronic means of advice through telephone gateways et cetera. I do not accept his definition of the capabilities of people to get advice this way. I think he is out of date in that respect-

Noble Lords: Oh!

Lord McNally: People now use local library facilities, go online and use all kinds of ways. I repeat that we are looking at the not-for-profit sector to see how it will be able to help. We do not always preach the worst-case solutions and scenarios which, again, have been the common theme from my noble friend. We are reforming the legal aid scheme, as the previous Administration said they would. It will cause differences in structure for the not-for-profit sector. We are trying to help it to adjust in that transition and are urgently looking for a long-term solution as far as its funding is concerned.

The Lord Bishop of Norwich: My Lords, what impact does the Minister expect the cuts to have, in particular, on disabled people who rely very heavily on law centres for advice on housing and welfare issues? Might this not be a further blow to those who are already disadvantaged in making their case to tribunals?

Lord McNally: We are having this debate more widely in the Bills going through the House. Some of the worst-case scenarios will not be borne out by experience. I think that the not-for-profit sector will

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adjust to these new circumstances. We have argued the case in the Bills for the changes we are making, which we think will not be borne out with some of the-I put it at its most gentle-worst-case scenarios that are put forward by those opposing us.

Companies: Executive Remuneration

Question

2.59 pm

Asked By Lord Lea of Crondall

To ask Her Majesty's Government how they will ensure that company boards take full account of the interests and views of employees and the wider public in the determination of executive board pay.

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, it is not for Government to micromanage how companies set board pay. Indeed, it is for shareholders to challenge where they believe pay is inappropriate. Last week, the Secretary of State for Business, Innovation and Skills announced proposals to improve the information that shareholders have at their disposal, and this includes requiring companies to report on how they have taken account of the views and pay levels of employees, and company performance, when setting executive pay.

Lord Lea of Crondall: I thank the Minister for that reply. Mr Cable's statement undoubtedly contained some excellent analysis, but two questions arise. First, without implementing Ed Miliband's proposal for worker representatives to be on remuneration committees but simply relying on corporate shareholders to stop the insane leapfrogging that goes on at present, what is there-except in the special case of RBS-that will bring about these overdue changes? Secondly, on information and consultation bodies in industry, Mr Cable's wish for things to move faster than the present snail's pace is welcome, but again it is not clear what the driver of faster change will be. Will the Secretary of State take an early opportunity to discuss his ideas on this with the TUC?

Baroness Wilcox: Actually, shareholders are getting more engaged on the issue of pay. They have publicly stated their intention to get tougher, particularly with the large public companies, and we are giving them the tools to do this, which is what the Secretary of State, Vince Cable, said last week. As to the second half of the question-which the noble Lord is perfectly entitled to ask, as he reminded me before we came in here today-my ministerial colleagues Vince Cable and Ed Davey meet regularly with representatives of the TUC and will look to discuss this with them the next time they meet.

Lord Myners: My Lords, I declare an interest as a partner in a fund management firm. The Leader of the House in the other place said in answer to a question from my honourable friend Ms Angela Eagle

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before the recess that the Government were looking into the case for shareholders being represented on the nominations committees that appoint the independent directors to boards. Vince Cable said nothing on this subject. Can the Minister explain why he was silent on that, and can she assure us that the ministry will ask Professor John Kay to ensure that this is investigated in his review on governance?

Baroness Wilcox: The noble Lord gave the answer in the question that he asked me. Professor Kay will be giving his interim review next month and I am absolutely sure he will be answering the question that the noble Lord has asked.

Lord Razzall: My Lords, I am sure that the noble Baroness is aware that the Secretary of State's statement endorsed 10 of the 12 recommendations of the High Pay Commission; the major one that was not endorsed was that there should be employee representatives on the remuneration committee. Is she prepared to expand a little on that and accept that there are a number of reasons for it, particularly the difficulty for companies that have the majority of their employees outside the United Kingdom? Will she also accept that one of the problems is weak trade union recognition among leading companies, and can she expand on what the Government propose to do to honour the Secretary of State's undertaking to try to obtain the views of employees on these issues?

Baroness Wilcox: The Secretary of State gave a very broad, sweeping statement last week, as my noble friend has already mentioned, which he will be speaking to more and more as the weeks go on. Putting employees on board committees is something that obviously everybody would like to see happen. The closed shop of boards and board committees needs to change and we are taking measures to promote diversity. However, as the Secretary of State made clear last week, bringing people on to board committees who are not also company directors, with the associate responsibilities, is not the way forward.

Lord Nickson: My Lords, do the Government agree with the article in today's Times by Sir Roger Carr, president of the CBI, that if the business climate is to thrive in the United Kingdom, both politicians and the public need to understand and respect the need for it to do so, and the wealth and the employment that it creates, and that unless we do, we are quite likely to be negative in that respect? Do the Government agree with the sentiments expressed by Sir Roger Carr?

Baroness Wilcox: We want individuals who genuinely create jobs and wealth for the UK to be appropriately rewarded, but it is not right that people are rewarded for lacklustre performance. That is the area that we have to look at and the area that we are encouraging the shareholders, especially the big ones, to look at, too. If they can get the conditions in which deals are arranged, I am quite sure that everyone will be delighted to see one of the great men of the world who can run these companies actually run a British company and get whatever bonus he is entitled to.

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Lord Monks: My Lords, in view of the Government's confidence that shareholders will be able, under these new arrangements, to curb inflation in boardrooms, which has been rampant, are the Government prepared to revisit quickly the issue of representations on remuneration committees by outside interests, including employees, especially in the light of the successful experience of this in neighbouring countries across the North Sea?

Baroness Wilcox: I have lived in the European Union and worked in companies there that have very different methods from ours. One of the things that I found difficult was that very often when one had a range of employees on the board, the board's decisions would be taken outside the boardroom and what happened inside the boardroom was rubber-stamping. We certainly do not want to see that in this country. However, we are looking at whatever we can. I will reinforce the point, if I may, that UK employees in large companies already have the right to request that their employers consult them through information and consultation arrangements, and we would encourage them to use those arrangements. More than that, I would encourage the union leaders to encourage employee members to use them-they are available to them-rather than necessarily taking them down the path of a more extravagant gesture.

Welfare Reform Bill

Third Reading

3.07 pm

"such additional amount to be paid at either a higher rate, or a lower rate, which shall be no less than two-thirds of the higher rate as may be prescribed"

Baroness Meacher: My Lords, Amendment 1 seeks to ensure that the gap between the higher and normal-rate additions for disabled children is not too great. The Government's proposals for these additions, according to the Minister, are designed to be revenue neutral. The money saved is to be used to raise the level of income for adults in the support group.

Baroness Garden of Frognal: My Lords, I apologise to the noble Baroness, but might I just suggest that people leave the Chamber quietly, because it is very difficult to hear what she is saying?

Baroness Meacher: The amendment proposes that Ministers revisit the relationship between the new levels of disability addition for children and allocate resources to adults in the support group when new

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money allows. I know that we must move on from arguments made on Report, but I must make just a few points to help my argument here to be coherent.

Very briefly, under the new provision for a disability addition and a higher addition, families who have a child who is eligible for the higher addition will receive £1.50 per week more than current claimants do, but families with disabled children who do not meet the stiff criteria for the higher addition will receive £27 per week less. Most families with a disabled child will therefore lose about £1,400 a year.

This amendment would peg the normal addition for disabled children at two-thirds the level of the higher disability addition for children. The House voted on a more radical amendment on this issue on Report and the Division was lost by two votes. We are seeking to eliminate the cliff-edge between the two levels of disability addition for children because all such families are far less likely, for example, to be able to rely on relatives or other informal carers. Their childcare costs will be far higher than those with a non-disabled child. Of course, families will have to pay 30 per cent of their childcare costs whereas today they pay, I think, 5 per cent. There really is an issue of work incentives for those parents, although I understand that the Minister will have a go at me on that issue.

On another terribly important matter, the need for high childcare costs will continue until the child is very much older, if not indefinitely. That applies to children who would not qualify for the higher rate addition yet who may be very severely disabled. That is the point. This amendment would go a long way to creating a much fairer system, which is what we are all about.

One might ask whether it really matters. It does matter because 100,000 or so disabled children affected by this loss of benefit are very likely to live in poverty. Recent research by the Children's Society indicates that once the additional costs of disability are accounted for, four in every 10 disabled children are living in poverty and a loss of income would really matter. Therefore, disabled children would not only live in poverty but would have vastly greater costs.

The Government argue that their new additions align the levels of support for disabled children with those for disabled adults, but the levels of support are based on completely different tests. For children the test is based on eligibility for DLA, and for adults it is based on their fitness for work. So I am not quite sure how the Government are arguing that these have been aligned.

The Government argue that the changes will ease the transition to adulthood for disabled children. On Report, the Minister said:

"We want to smooth the transition from childhood to adulthood by removing that artificial divide".-[Official Report, 12/12/11; col. 1054.]

In fact, the restructuring will reduce the support for most disabled children. It will not reduce the support for the very most disabled children who require night-time care, but it will reduce it for others. Therefore, I do not accept the argument.

There are good reasons for proposing a disability addition at two-thirds of the higher rate for children. This addition is needed to contribute to the costs of

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special clothing, repairing damage, safety measures and special food, and to contribute to the costs of giving disabled children access to the opportunities that other children have. We know that simple things like swimming lessons cost something like £270 for 12 lessons for a disabled child as opposed to £80 for a normal child. Where will that money come from? A summer club costs £450 per week for a disabled child compared with £100 a week for a non-disabled child. Yet these are the things that would give a parent a break and really help a child to socialise and benefit from development opportunities.

The Government's proposed child additions go nowhere near covering these extra costs. I fear that their proposed reforms to disability additions are short-term fixes. I understand the position of the Minister, who is under huge pressure from the Treasury. One of the troubles for this House and noble Lords is that this reform, much of which we support in principle, is being tangled up with swingeing cuts to benefits which are having unacceptable impacts. Therefore, we are trying at the edge to ameliorate some of those unacceptable impacts. That is what we are about. The Government's proposed reforms to disability additions therefore need another look by Ministers.

I turn to the particular problems of single parents with a disabled child. Many years ago I ran a group for parents of severely disabled children. I expected lots of mums and dads to turn up, and I was faced with what I thought was an absolute tragedy: the room was full of mothers who told me that the fathers had gone. Many of them had left home within months of the birth of the disabled child. It is these mothers and a great deal of others whom we need to have in our minds today.

Many parents of disabled children will be doing something very valuable for society by staying at home to develop their children's full potential. They should not be under pressure, even in these stringent times, to go out and stack shelves. By devoting themselves full-time to therapy, play exercises and other learning activities, they are reducing the dependency levels of their children that, with luck, will last throughout their lives-some cannot make progress, of course, but many can-and increasing the possibility that their children can develop a degree of independence, and maybe even financial independence, in adulthood. It would be wise for the Government to take this issue very seriously.

I would ask the Minister to revisit the two levels of disability additions to consider whether the balance is right. Is there not merit in leaving the higher rate at £76 and retaining the basic level at two-thirds of that sum, which is something like £50? That really would make an enormous difference to these families. I would be grateful if the Minister would agree to take this matter away for further consideration, even at this very late stage, in the light of what I think are very powerful arguments for some change in their approach. Finally, will he agree to review the impact of the disability benefits changes in the universal credit system one year after its introduction-although I know that the system is to be introduced over time, so a year may

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not be terribly realistic? While doing that, will the Minister consider taking a look at reviewing the entire welfare reform package? I beg to move.

3.15 pm

Baroness Wilkins: My Lords, I have added my name to this amendment, which has been ably introduced by the noble Baroness, Lady Meacher. The children we are talking about, those who will be affected by this reduction in benefit, are those who are profoundly deaf, who have Down's syndrome and those with cerebral palsy, among many other conditions. The Government are focusing their resources on the most severely disabled, but the costs of bringing up a disabled child do not equate with the severity of the impairment. The care costs can be just as expensive, sometimes even more so, for bringing up a child who will qualify only for the future lower rate of addition under the Bill.

I grew up with my friend's younger sister who was born with cerebral palsy. It was a family with four children. The whole family's life was dominated by trips to London to visit her therapists, visits to hospital, visits to the swimming pool and so on, so that she could avoid contractures and had a chance to develop her full potential. Of course, we all had to go because there was no one to look after us at home. The cost must have been considerable. Then there were the costs of extra equipment, the constant wear on her clothes and so on. If Paula had qualified for the higher rate of care and needed night time attendance as well, it would have put a considerable strain on her family, but it would only marginally have increased the costs. Under this Bill, Paula's benefits would have been halved, and her chances of developing to her full potential and living an independent life would have had no hope at all.

What about profoundly deaf children? Most do not need day and night care and so would not qualify for the higher rate. The National Deaf Children's Society tells me that it was contacted by Laura, a single mother whose daughter was diagnosed as deaf soon after she was born. Laura had to give up her job as a nurse as she was the only person who was able to care for her child. She said to me that her life then spiralled out of control and she started getting into financial trouble. All she could think about was, "I have got to eat less and I have got to turn the heating down", otherwise she simply would not be able to support her daughter. The NDCS helped her to apply for the current benefits, and now that the stress of not being in financial trouble has gone, she is finally able to concentrate on learning to communicate with her child, thus giving her the best possible start in life. But under this Bill Laura would lose up to £1,400 a year. That is £22,000 over her daughter's childhood. The sum of £1,400 is the cost of heating your house for a year. Think of the danger and the misery that that will mean on a freezing cold day like today.

On Report, the Minister argued that he was working within a fixed financial envelope and that he just could not maintain the existing rates for disabled children if he was going to increase the rates for severely disabled adults. If ever there was an example of robbing poor

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Peter to pay poor Paul, this would be it. Surely the Chancellor is able to release his noble friend the Minister from this part of his restrictive envelope and find the money from the shoulders of people who would not notice the loss of £1,400 a year. We know that there are many of them; we read of them daily in our newspaper headlines.

Does the Prime Minister really wish to leave this as his legacy for disabled children-children with cerebral palsy? I urge your Lordships to support the amendment and send a message to the Commons to think again.

Baroness Thomas of Winchester: I gather that we are being asked not to rehearse all the arguments. We have, anyway, heard very full arguments from the noble Baronesses, Lady Meacher and Lady Wilkins. I shall try instead to concentrate on the amendment.

No one likes cliff edges of any sort in the benefits system, and this amendment tries to make one edge less steep over time. The cliff edge that the Government are trying to eliminate in universal credit is the amount of disability additions received, by way of different gateways, by new claimant families for a moderately disabled child under 16 and a moderately disabled adult of 16 and over. The amendment's cliff edge is different. It tries to address the difficult and sometimes rather artificial differences between the needs of a severely disabled child-whose family will get more money under the Bill-and those of a moderately disabled child and a much less disabled child, both of whose families will get much less money. I have great sympathy with the amendment because I believe that as many families as possible with even moderately disabled children should be helped, although I acknowledge that the amendment, narrowly drawn as it is, to some extent preserves the cliff edge between the disability needs of children and adults in universal credit which the Government are trying to eliminate.

The question is whether the formula in the amendment should be locked into the Bill, or whether everything should be left to regulations. My noble friend Lord German will address that shortly.

Baroness Browning: My Lords, I should like to talk directly to my noble friend the Minister about money, because we all understand the imperative to reduce the deficit and how, right the way through the Bill, trying to cut back has been part of the debate on almost every clause. However, this amendment seeks to attain proportionality between that higher and lower amount of addition made to universal credit for disabled children.

I come back to a question that we have raised in previous debates: what exactly do we mean by "disability light", because that is really what we are talking about. These are still disabled children, in the same way as, in other parts of the Bill, they are still disabled adults. It might be presumed that it is somehow like comparing a light head cold with a really nasty bout of flu, but I say to my noble friend-I should have referred to my interests in the register-that it is not like that. For children with disabilities who will lose this huge sum of money and for their carers, particularly the parents, the impact will be great. We have already heard in your Lordships' House today about the impact on some-not

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all-families of caring for a disabled child, as well as on the relationship between the parents and-and this should never be forgotten-on other siblings. Usually there are other people in the family. They all share in the responsibility when they share a household with a disabled child.

I have spent many years dealing with casework for what must run into hundreds, if not thousands, of adults and children on the autistic spectrum. If this is about money, I hope my noble friend will take my word for it that although they might be considered as "disabled light" in childhood, a huge proportion of them will be the big bills to the public purse later on in adolescence and adulthood. Not only is the human cost of that tragic and avoidable-because most of it is avoidable, if it is properly planned and cared for-but there is the economic aspect. Just putting in the basics early enough, some of which are very low-budget items, can prevent the very big crisis-budget bills that inevitably come. I say "inevitably" quite deliberately, because that is what we know happens; it is well recorded. We have enough evidence of this right across the whole disability spectrum, particularly in some of those spectrums that I take a particular interest in, which are not immediately visible. They are the ones where there is no obvious physical disability but which none the less have a profound impact on the individual concerned. I do not want to overegg this, but Members of the House will have seen the headlines. We see these tragic cases where parents have a disabled child who is sometimes of school age but sometimes an adult dependent child; for those parents, childhood does not end at 18 or when they leave education, it goes on year after year. I can think of some pensioner parents with pensioner-age children still living at home and wondering what is going to happen to them. This is a lifetime commitment for parents.

I am quite sure that if my noble friend, and certainly the Treasury, have done the cost-benefit analysis that I asked for when we discussed DLA in the context of this Bill, they will find that this amendment, although not what the Government are proposing, will save the public purse over the medium to longer term. If we look at it in those crude terms-because that is what I feel they are-we will save a lot of pain and anguish. We will certainly save lives. At the end of the day, it will also save the Exchequer money in some part of the public sector where it will almost certainly have to be found in a hurry.

Baroness Hollins: My Lords, I stand very briefly to support this amendment. As a psychiatrist who has worked for many years with families with disabled children such as those we have been hearing about, I feel very strongly about the point that the noble Baroness, Lady Browning, made about proportionality. It is very difficult to base the cost of having a disabled child on whether the child needs care at night or only during the day. This relates particularly to children who have very difficult and challenging behaviour, including those with learning disabilities who might have attention deficit syndromes or autistic spectrum disorders. This amendment needs very careful and thoughtful consideration.

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3.30 pm

The Countess of Mar: My Lords, I am pleased to support this amendment so ably moved by my noble friend Lady Meacher and so clearly defined by the noble Baronesses, Lady Wilkins and Lady Browning. The principles behind universal credit are an acknowledged improvement on the current arrangements for benefits for people who are either in or out of work. Noble Lords cannot but be aware of the enormous strains that disability can put on individuals and their families. That has been pointed out to us today. These strains fall disproportionately on parents of children with disabilities. Most of the time the public are unaware of the emotional demands made by a child with whom his parents cannot reason and whose needs are unending, unpredictable and create additional burdens on the family finances. I have a huge respect for mothers who continue to cope while at the end of their tethers.

The improvements in neonatal survival rates have brought with them more children who are very dependent. Some will never be wholly independent. Some children become disabled through illness or accident for which no one is to blame. There will be no huge compensation payouts for them. This is a responsibility that can be too much for parents to bear alone and I believe that we should all ensure that they receive adequate support.

Recent research by Dr Esther Crawley at Bristol University showed that as many as one in 100 children away from school may have CFS/ME. Many of these children are currently in receipt of DLA at the lower rate, which has a mobility component, as well as others at the higher rate, although they can walk short distances. We do not know how such children will be assessed in future, although if the PIP assessment is anything to go by they will lose the mobility component. Their DLA helps with childcare costs and transport, among other things. It also provides a passport to other benefits, such as Blue Badge, congestion charge exemption and the London Taxicard. As one mother put it to me recently:

"Without these my daughter would essentially be housebound and not only would have no social life whatsoever, but she couldn't get to medical or dental appointments or places of educational interest associated with her studies. She is a clever talented girl who cannot progress to higher education without these things".

I am growing increasingly concerned about the strains that we are about to put on our less fortunate citizens by the provisions of this Bill. There are reports appearing on a regular basis of deaths of people found by ATOS to be fit for work. Chris Grayling acknowledged that 31 people had died while awaiting their appeals in the three years to last October. I understand that benefit cuts are also confirmed by coroners as the cause of at least 16 suicides. The noble Baroness, Lady Browning, has mentioned mothers who have murdered their children and then committed suicide.

Too often children with disabilities are cared for by a lone parent, as we heard from my noble friend Lady Meacher. Rejection of this amendment could be the last straw. Acceptance of this amendment may well be their lifeline.

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Lord Wigley: My Lords, I support this amendment. I am not going to repeat what I said at Second Reading, in Committee and at Report stage, save to emphasise once again that as a family who lost two severely handicapped boys we know the impact of cost when there is disability in the family. Although at their latter stages they would undoubtedly have had the highest available support, at earlier stages they would probably not under the definitions now current. There are thousands of children and families who will most certainly miss out.

We are told that Disability Rights UK is very concerned about the impact that this will have on families with disabled children and particularly, as in our case, on those with more than one disabled child. It is concerned about the effect that it will have on the longer-term life chances if they grow up in poverty. The Minister said at Report stage that,

"the impact of the reform of disability payments on the number of disabled children living in relative poverty will be negligible".-[Official Report, 12/12/11; col. 1055.]

Negligible-that is not the assessment of others. The Children's Society estimates that over 40 per cent of disabled children already live in poverty. The Minister conceded at Report stage that we are talking about taking £200 million and redirecting it. What will be the effect of taking £200 million off those who already are very near to poverty? That is surely not acceptable.

The Minister emphasised at Report stage the provisions of the transitional arrangements being made, but he conceded that as inflation bites-and it is still running at 5 per cent-the value of this will erode, which will be a real loss to these most vulnerable people. If this issue is to be considered further, as the mover of the amendment requested, and the Government give it further thought, we must keep the issue alive by adopting the amendment today. Otherwise we will lose the opportunity. I beg the Government either to accept this or to come back with their own amendments in another place and bring them here-or, alternatively, I suggest that we as a House ensure that they are carried.

Lord Walton of Detchant: My Lords, I, too, wish to speak relatively briefly to this important amendment. In the course of my neurological training and in my career, I spent some time assessing children with cerebral palsy who attended the excellent Percy Hedley centre in Newcastle upon Tyne and received outstanding treatment. However, when I saw the varying degrees of disability produced by this group of conditions-a group of immense variability-and saw the effect that the condition of these children had on their families, sometimes leading to family breakdown, as the noble Baroness, Lady Browning, said, I became increasingly concerned about the evidence of the disability and the resultant poverty which developed in many of these families.

Some of my personal research was dealing with a progressive disease-Duchenne muscular dystrophy-where young boys born apparently normal would begin at about the age of three to have difficulty in walking. They then began to have problems with falling frequently and getting up from the floor, and

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progressively became increasingly disabled so that many of them were taken to a wheelchair by the time that they were aged 10. I saw the effect that this had when not just one but two boys might be affected in an individual family, and the problems faced by those parents were immense. I shall never forget one mother saying to me, "I see my son die a little every day".

I am not talking just about static conditions such as cerebral palsy-although even in cerebral palsy as the child becomes older, the disability may remain neurologically non-progressive-but about the problems that begin to emerge over schooling and a whole series of other issues, which become increasingly important and increasingly matters for concern. I could go on about my personal experience in the field of neurology and paediatric neurology but I would simply say that this is a very worthwhile amendment, and one which deserves your Lordships' support.

Lord Newton of Braintree: My Lords, I wonder whether I might intervene briefly. I am in a slightly awkward position, and it may not surprise the House to know that I have been approached by all parties to this argument, either to say something on their side or to shut up. I am going to make a slightly ambivalent speech which will leave a lot depending on the Minister. I fully support the concerns that have been expressed by the noble Baroness, Lady Meacher, by my noble friends Lady Thomas of Winchester and Lady Browning, and by others. The Government need to listen to this and take heed, and come forward with proposals which address these concerns.

In the light of what I said last week, it will not surprise the House to know that I do not think that setting benefit rates or benefit relationships in concrete in primary legislation is sensible. I would prefer that we leave it for Ministers to decide in regulations, as the Bill provides, provided it is clear that they are going to put something sensible in those regulations and that we shall have a proper opportunity to scrutinise them. It will follow from that that I want a positive response from the Minister before deciding what I am going to do.

I will make one further point, which picks up on what the noble Lord, Lord Walton, was saying. The other thing that strikes me about setting things in concrete is that this is a world in which things change very fast, because of medical advances. He referred to Duchenne muscular dystrophy. I think I have more knowledge of cystic fibrosis, where the world has moved on hugely in the past 20 or 30 years-not least because of work done at the hospital of which I used to be chairman, the Royal Brompton-and that is happening all over the scene. Conditions that were immediately life-threatening or life-limiting at a very early age are now more treatable, and life is longer. Anything that ties us down to an inflexible framework for dealing with these problems is probably not the right way forward.

That, though, is simply a view that I express to the House. My fundamental point is that this is better dealt with in regulations, provided we can ensure that the Government will do that. I look forward to hearing what my noble friend has to say.

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Lord Peston: My Lords, I congratulate my old friend the noble Baroness, Lady Meacher, on her excellent introduction to the amendment.

I have two points to make. First, regarding the excellent speech by the noble Baroness, Lady Browning, I used to be an expert on cost-benefit analysis; indeed, I did the very first piece of cost-benefit analysis ever done in the Treasury, and I am talking about a very long time ago. I have not the slightest doubt that if the Government were to conduct such an analysis-I am too old now to do it for them-of what they are doing in this area, it would show that there will be no net economic saving nor net financial saving from what they are doing now. Nor do I have the slightest doubt that there are plenty of very good economists in the Treasury who already know that.

My main point is that the question before us is an ethical one and should not be treated primarily in economic and financial terms. Your Lordships' House is the best suited place that I know of to discuss such matters; indeed, I believe that we have a duty to consider the ethical aspects of what the Government are doing with regard to disabled young people. My main intellectual hobby is philosophy, and I know no philosopher who has ever written on the subject of ethics who would be other than appalled at the notion that we are discussing which group of disabled should bear the burden. Those philosophers would regard that as a rather sick formulation of policy-making and would be equally appalled that such burdens should fall on two of the most vulnerable groups in our society. The first group is the young disabled, about whom their view would be that if the Government cannot find the money, we taxpayers should meet the cost. That would be the correct ethical response to all this. The second group we ought also to bear in mind, as various contributors have mentioned, is carers and the burden placed them. I thank goodness that I have never had to be a carer in that sense. As has been pointed out, those carers worry about whether they dare die as their disabled people have got older.

The Government simply should not be going down this path. I say in terms to the Minister that he should be ashamed of himself in trying to defend such unethical behaviour.

3.45 pm

Baroness Howe of Idlicote: My Lords, a Division on a similar amendment was lost by two votes. We must all remember that we have here a compromise that would mean that at least some of the huge number of children would not be as severely deprived of the many things that they need in their lives as otherwise. It is also a question, as we have heard graphically spelt out, of many single parents, mainly young mothers, coping on their own with all these additional burdens and the need to stretch the money in ways that your Lordships have read about day after day in the pleadings that come through to us all. I ask the Minister to give serious consideration to whether a compromise of some sort would do. Personally, I would prefer the amendment as it is to be passed in full; it is about the maximum that any reasonable, fair-minded person would be happy to receive.

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The amendment tabled earlier by the noble and learned Lord, Lord Mackay of Clashfern, was passed. If the Minister cannot give us sufficient reassurance and this amendment is voted on and passed, the other place will have an opportunity to see just how widespread is the support for it across all Benches, as we saw with the noble and learned Lord's amendment. Therefore, I hope that the Minister will think very hard about accepting this amendment, which was so brilliantly moved by my noble friend Lady Meacher.

Baroness Finlay of Llandaff: My Lords, it has been said that the mark of a civilised society is the way that it cares for its most vulnerable. I remind the Minister that the speech of the noble Baroness, Lady Browning, encapsulated the societal burden of a failure to demonstrate that we are a civilised society.

I wish to put some figures on the table which have not been mentioned in the debate to date. The Family Fund is a charity that provides grants to low-income families caring for severely disabled children. In 2010, it had to pay out to a range of families, 64 per cent of whom had a child who was not receiving the higher rate of DLA. Recent figures from the Social Fund found that 69 per cent of families with disabled children are worried about their financial situation, with 61 per cent of those struggling to pay monthly bills and three-quarters believing that the high costs of caring for a disabled child are the cause of their financial situation. Other children in the family will suffer as a result of that, probably disproportionately greatly, because the psychology of a parent caring for a disabled child often dictates that that child becomes a focus of disproportionate attention.

Research by CLIC Sargent found that on average parents spend about £367 on extra expenses a month following a child's cancer diagnosis and treatment, resulting in an annual spend of about £4,400 for parents of a child with cancer. When these families, whether suddenly or gradually devastated by illness, do not have the money they need with which to pay not for luxuries but very basic things to enable them to provide care for the disabled child, the other children in the family, the health service and society as a whole end up paying a higher price in many domains.

The amendment was eloquently introduced by my noble friend Lady Meacher. I urge the Minister to accept it, thereby removing the need to test the opinion of the House.

Baroness Howarth of Breckland: My Lords, I support this amendment, but in so doing I understand the position in which the noble Lord finds himself with a set of sealed envelopes. Like many other noble Lords, I encourage him to go back to the Treasury, or at least to have a look at how the available funding can be properly distributed. After all, this is a compromise. Personally, I would like us not to be in this position at all but rather to ensure that we do not make any cuts, because these are cuts-unlike some of the other reforms-to the budgets of families with disabled children.

I do not want to repeat the eloquent speeches that have already been made but to make three brief and, I hope, slightly different points. First, the Government

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need to take the long view as regards financial management. If we take the short-term view, we will find that many of these families will fall into even more disarray than they are in already. We should remember that, as has been said-I reinforce this point-the majority of these families are single-parent families looked after by mothers. These are not women who have had a child for some feckless reason, as is often portrayed in the newspapers, but women whose husbands cannot tolerate the pressure of having a disabled child in the household and have simply gone out of the picture-so these women are alone. Often that means that they cannot support their child's situation, which results in many children going into care. I shall not quote more statistics, but noble Lords know that there are large numbers of disabled children in care at the moment and placing them in foster homes is very difficult; in fact, to get them adopted is almost impossible. The state's burden of caring for such children is huge; the costs per week of caring for a disabled child can run into thousands. In taking the long view, we have to remember the number of children in care.

My last point is that, as several people have said, if we are a civilised society, we want children to grow up to be active young people and to have a proper transition into adulthood. I declare an interest as the president of Livability, a charity which looks after young people in schools, in colleges and through into adult care. I understand the need for that transition. If we are to do that and if we are to ensure that such families have a proper life, appropriate funding is crucial. Noble Lords may have disabled children but, if you are trying to bring them up on the kind of money that these families have and in the housing conditions and relationship situations of these families, funding is absolutely crucial to underpin the care, love and continuity that these children desperately need. I ask the Minister to look in his envelopes again to see whether there is not some way in which the money can be redistributed to ensure that that does not happen.

Lord German:My Lords, I would like to take a little further the arguments, put by the noble Lord, Lord Newton, about where we go with the concerns that have been widely expressed around the House. It is worth reminding noble Lords that the intention expressed by the Minister is not in the Bill before us; that is the subject of future regulations that are to be brought forward. I understand that the purpose behind the amendment is to lock the Minister into a pattern which will remain for many years to come. If you put something into primary legislation, it will be locked there for many years until time is found to change it. I shall return to some of those issues later.

One thing that has not been mentioned is the other cliff edge-my noble friend Lady Thomas mentioned this in her speech-relating to those who are 16 and those who are 17. The cliff edge is enormous. We also have to consider the change in the funding, although it is not the subject of this amendment, but it is the subject of the Minister's thinking, as expressed to us. Many people see the problem of no continuity for disabled people between the ages of 15, 16 and 17. That is the issue that the Minister is concerned about.

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Another related issue is not just the level of payments, but the way in which the payments will be funded over time. Perhaps this House would be better thinking about having a further debate on this or having that discussion during proceedings on regulations. I shall come back to how that might happen in a moment. There are two possible routes out of the problem of the distinct difference in the funding for those who are post-16 and those who are less than 16. I guess that one of the ways might be to create new tiers. There are already three tiers in DLA and there are two tiers for adults. At some stage in the future, a Government-this one or a future Government-might decide that it is essential to have three tiers and they might want to redesignate. Of course, that would be stopped by this amendment.

The second and more purposeful way in which the amendment would not allow change would be as regards transitioning; I do not mean the transitional measures in the Bill, but moving to rectify the enormous cliff edge that occurs at the age of 16. For that to happen, it may well be that a Government of whatever kind would want some form of progress on changing the relationship between post-16 and under-16 provision.

All those things would not be assisted by an amendment that locked into aspic a set of placements between one set of benefits and other, and missed out the other half of this equation, which is not the subject of the amendment. Of course there are concerns about the levels of payment that go into these particular directions. If you forage around the background of these particular payments-they go back to supplementary benefits, and I guess that some noble Lords here will remember how those originated-their purpose was to pay for the additional costs that were not being funded from the disability living allowance system that we now have. Those payments related mainly to items such as energy costs-the costs of extra baths, the need for more heating in the house, extra hot water and so on. Those are very much some of the issues that face the over-16s as well as the under-16s.

We need to have this debate, but need to have it in terms of the absolute flexibility that we can create in the environment between now and when the Minister brings forward his regulations. I am sure that he has listened to what has been said today, and my advice to my noble friend would be to heed the warnings that have been given. Clearly, there are very strong views about how you treat disabled children but, at the same time, I ask noble Lords to consider in the same breath the plight of those over 16 and to think about how best we might approach this issue.

A compromise situation might well be achieved by my noble friend listening to this debate and saying that he will discuss these matters when we come forward with the regulations. I know that many noble Lords will think that you cannot do anything about regulations: they are laid before you and you can either vote for them or not. We are laying markers now and there are markers that people can lay. I am sure that all the lobby groups are lined up, ready to influence the Minister in this matter. There is time-is there not?-for us to make sure that we do not put right one problem and cause another to be set in stone against it. We

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need that flexibility and I hope my noble friend is listening to that, will heed what he is hearing, but give a commitment that he will consider these matters when he brings forward his regulations.

Baroness Hollis of Heigham: My Lords, I should like to come back on some of the points made by the noble Lords, Lord Newton and Lord German. First, I say to the noble Lord, Lord German, that this is a very narrow amendment. It is being considered at Third Reading and we were advised to focus very narrowly on the subject that we are discussing, and not to say that because we cannot do enough for older disabled young people we should therefore make younger disabled children poorer. That is what the noble Lord, Lord German, was arguing for in part of his speech, and I was sad about that. I thought it was inappropriate as well as, frankly, irrelevant-given the steer we were given from the Table about the amendment.

Secondly, the noble Lords, Lord German and Lord Newton, asked the Minister to take the opinion of the House and to come back in regulations, as though-in the words of the noble Lord, Lord Newton-we would otherwise be setting payments in concrete or, as the noble Lord, Lord German, said, in aspic. I think I prefer aspic to concrete but, none the less, the point is that we are not doing that at all. That would be fundamentally to misunderstand what the amendment seeks to do. It would be wrong to put in the Bill a precise sum of money that would require primary legislation to change. That would be wrong because it would fix a payment in concrete or aspic. We are not doing that. This amendment establishes a principle of proportionality, because-as the noble Baroness, Lady Browning, said so movingly and as so many other noble Lords, including the noble Lord, Lord Wigley, who have personal experience of this, said-the costs of disability are not just connected to the degree of disability; they are on a spectrum and may change.

Unless the amendment is passed, the Government propose that more severely disabled children will have one sum and less severely disabled children will have one-third of that sum. The amendment proposes that the right proportionality would be two-thirds of that sum. That is the principle, because we accept the arguments that have been put today by people with first-hand caring responsibilities, such as the noble Baroness, Lady Hollins, in a very moving speech, and during the whole passage of the Bill. The principle here is that disabled children fall on a spectrum of disabled needs, costs and of either an improving or a deteriorating condition. Therefore, we should not have an arbitrary line as to whether you get the full sum or one-third of it. It is not about fixing a sum of money in concrete, it is about a principle that one should be proportionate to the other. That is all we are asking the House to discuss today.

4 pm

Lord Newton of Braintree: I did not suggest that this was setting rates in concrete; I suggested that it was setting relationships between rates in concrete.

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That runs into the point that the noble Baroness just made and my earlier point: that there is a spectrum which changes over time.

Baroness Hollis of Heigham: The noble Lord is precisely right and has therefore made my point for me. Precisely because that relationship may change over time, we do not want the cliff edge of being on either one-third or three-thirds of the rate. Precisely because, as he says, it changes over time, we want to reduce that cliff edge and not make such a sharp distinction in the spectrum of disability.

The final point that both the noble Lords, Lord German and Lord Newton, argued was that this should be in regulations because they believe in the benevolence of the Minister on the issue, as we all do. I am confident that the enemy of or opposition to the amendment is not the Minister. We know him, as we have been engaged in discussion in Committee and at Report. His principles, integrity, evidence and assiduity are without comparison. His enemy is the Treasury. I put to the House a simple question. Which does the House believe will most strengthen the Minister's arm in seeking to follow the wishes of the whole House as expressed today: leaving it to regulations which we cannot amend some way down the line-three months, six months, nine months or a year-when the Treasury can say "Go away", as it said to me on many occasions; or passing an amendment today which would insist that the House of Commons and the Treasury think again? If they turn it over, I will be sorry about what I will regard as having happened to their moral compass, but that is their right and privilege.

I know that the noble Lord, Lord Freud, will have to read his script. I do not expect him to either confirm or deny this, but he will have to read out things that he would wish he could say differently. Whatever he may say, if we want to aid him today in his battle with the Treasury on behalf of the most vulnerable people in our entire society, we will support the amendment to establish the principle of proportionality in the Bill.

Lord McKenzie of Luton: My Lords, we support the amendment moved so comprehensively and eloquently by the noble Baroness, Lady Meacher. This has been a powerful debate with a strong ethical strand, as my noble friend Lord Peston said that it should be. My job is made easier by the contribution we have just heard from my noble friend Lady Hollis, who dealt comprehensively with those who argue that we should deal with this in regulations. The fact is that we have tried at earlier stages to reach the position that the amendment now provides and have been unsuccessful-as my noble friend said, possibly not because that is where the Minister wants to be but because that is the policy imposed on him. I think that my noble friend is absolutely right: if we pass this amendment today, we will put down a clear marker on proportionality, which will strengthen those who have to go and argue with the Treasury about resources.

As we have heard, the amendment seeks to prevent the interests of one group of disabled people being played off against those of another by limiting the

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ratio between the higher and lower levels of disability support. At present, as we have heard, the Government's proposals would lead to a significant cut in the amount of support for disabled children on the lower rate of support, amounting to some £27 a week, or over £1,300 a year, with around 100,000 families seeing this drop in their support. We have heard some graphic descriptions from my noble friend Lady Wilkins about what support meant for her family. We also heard from the noble Lord, Lord Wigley, and the noble Baroness, Lady Browning, who made the very telling point that this is about the whole family-siblings as well-for whom the level of support can make a real difference.

The Government have suggested that this money would be recycled into higher levels of support for disabled adults on the higher rate, but we do not believe that this is a trade-off that anyone wants to see. The interests of adults with severe disabilities should not be played off against those of children with lower-level disabilities, which, as we have heard, may well include conditions such as Down's syndrome and profound deafness. Such children have no opportunities themselves to increase their income, and we know the problems that parents caring for these children can face when trying to find paid work or increase their hours.

The amendment does not seek to prescribe the levels of support, which will of course be a matter for the Government of the day and will depend on what resources allow, but it does seek to embed the principle that, although there is a need to recognise that some conditions require a higher level of support than others, this should not be used as a reason to downgrade the needs of the many disabled children-and their families-who currently rely on the lower level. Perhaps the Minister could outline in his response, first, what he believes the ratio between the two rates should be and, secondly, how he intends to ensure that those on the lower level do not see a dramatic fall in the support that they receive.

We will doubtless hear again that transitional relief will protect some claimants. However, we know that this is not a protection in real terms and in any event it does not help new claimants. Perhaps we can hear from the Minister what changes in household circumstances he considers would break even this partial protection. In making these judgments, what weight do the Government give to the fact that disabled children are more likely to live in poverty than other children? The Minister may justify the current ratio as aligning support for adults and children. However, is it not the case-a point made by the noble Baroness, Lady Meacher-that the routes into the benefit are quite different: for disabled children through the DLA and for adults through the WCA? Is there not a disability disregard for disabled adults who can access work?

Much of our debate on the Bill has focused on its impact on children. We would all, I hope, recognise the necessity of combating poverty among children because it carries with it the prospect of greater poverty in later life. However, it would seem that on this matter the Government are shifting resources in the other direction from children to adults.

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It is perhaps appropriate that today we heard from the UK's four Children's Commissioners, who have put out a notice. I should like to finish by quoting them:

"Families who receive welfare benefits are particularly vulnerable because they live in poverty-small changes in their household income can have a big effect on their welfare. We are concerned that many more families and their children will be pushed into absolute poverty over the coming years if these proposed changes go ahead".

We support the amendment.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud): My Lords, I think that I have to take up the challenge of the noble Baroness, Lady Hollis, and try not to read anything at all in order to convince her that I actually believe in what I am going to say.

I preface my remarks by reminding noble Lords that the amendment is in the same territory as the one we discussed on Report that was moved by the noble Baroness, Lady Grey-Thompson, and on which there was a Division. I confess to feeling slight surprise when I saw it come back in such a similar guise. If my arguments sound somewhat familiar to noble Lords, it will be because they have heard many of them before. I need to go through them in the context of this skilfully drawn-up amendment.

I start by making it absolutely clear to all noble Lords-in particular, to my noble friend Lady Browning-that this is not about deficit reduction. Every penny of the money will be recycled to increase support for severely disabled children and adults. None of the money that we are talking about will go to Her Majesty's Treasury, with which I have absolutely cordial relations at all times. The principle that was picked up by my noble friends Lord German, Lord Newton and Lady Thomas concerns the cliff edge that exists at 16 when youngsters transition from childhood to adulthood. As my noble friend Lady Browning pointed out, many of these youngsters are in practice dependent on their families for a long time. The cliff edge is something that we wanted to smooth out. This will be essential to protect work incentives in adulthood.

I said many times in the debate that we are overhauling the whole support system for people who rely on benefits. It simply does not make sense to concentrate on any one element. The universal credit will provide a package of support for families to meet a range of their needs. That is why we need to look at the overall impact of universal credit on families rather than look at individual components. If some families get a bit less on one component, it does not mean that they will get less overall. I will pick up on the point raised by the noble Baronesses, Lady Meacher and Lady Wilkins, about some of the social activities that are required to have a good quality of life. The intention is for DLA to pay for those facilities. The purpose of universal credit is income replacement. The two benefits do different things.

I also remind noble Lords that, contrary to some estimates that have gone around this afternoon on the impact of universal credit, clearly the impact will be that families will be much better off. I remind noble Lords that I and my friends in the Treasury are managing

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on a steady-state basis to put £4 billion a year into the pockets of the poorest people through universal credit. That is the context in which we are making these changes. Noble Lords should not underestimate what it took to get that out through a government process: a steady-state £4 billion a year in universal credit for the poorest.

Baroness Meacher: My Lords, I think that I am right in saying that about £18 billion has been taken out in cuts. We are not getting extra benefit payments, but I applaud the Minister for having retrieved £4 billion; that is wonderful, and great news.

4.15 pm

Lord Freud: I am very grateful for the applause. I am not hearing a lot of it. The modelling that we have done in the department shows that, as a result of this measure on the reform of disability payments, the number of disabled children living in relative poverty will be negligible. The support for families in the universal credit package includes generous disregards for parents, plus the disability addition to the child element. Of course, we are also supporting formal childcare costs right the way down the hours spectrum in universal credit.

Lord McKenzie of Luton: I do not know whether the Minister is going to say anything further about poverty figures, but how does he deal with the report from the Family and Parenting Institute, prepared by the IFS, showing that relative child poverty will increase between 2010-11 and 2015-16 by around 400,000, and that absolute child poverty, as defined in the Child Poverty Act, will increase between those years by around 500,000? Does he dispute those figures?

Lord Freud: My Lords, we have spent a lot of time on child poverty, and the IFS projections do not take account of quite a few matters. They certainly do not take account of any change in government policy. Child poverty, to people's surprise generally, actually went down last year, and it is projected to go down this year. What happens in future will depend on how we respond. I should point out to the noble Lord that the IFS had some very positive things to say about the impact of universal credit on child poverty, and it has pointed out the impact that universal credit will have as it goes in the direction that he and indeed I want to see.

Let me go through some of the figures on what happens under universal credit for a parent with a disabled child who works 20 hours a week on minimum wage. That parent, and that family unit, is likely to be £73 a week better off in work under universal credit, compared with £13 in the present system under tax credits. There are some 30,000 more families with a disabled child in work than out of work, so that extra money is being targeted pretty effectively.

Let me remind noble Lords again about the figures for the support that we are providing. Under universal credit, an out-of-work family with a disabled child can receive just over £8,000 a year in benefits for its child

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after introduction of universal credit, compared with just over £4,000 for an out-of-work family with a non-disabled child and around £1,000 for a family that receives only child benefit.

Baroness Wilkins: The Minister said that those children will receive £8,000. They are receiving £9,500 under the current rules.

Lord Freud: The figure that we have on the average amount is £8,800. There is a 5 per cent difference in the overall package for that family under universal credit. Those are the figures that we have worked out for the average. Taken overall, it is a small decline, and clearly there is a substantial incentive for the family to look at work. Work becomes much more attractive. Even a few hours of work under universal credit becomes attractive in a way that is completely impossible today.

The Countess of Mar: How can a single mother with a severely disabled child go out to work?

Lord Freud: My Lords, we are talking about severely disabled children receiving the full rate of £77. That is the point: we are trying to direct the money towards the people with the greatest need regardless of their age. That is what we are trying to do here.

Baroness Meacher: We have to be very clear about this. One of the main reasons for this amendment is the fact that it is so difficult to divide those who are eligible for the higher rate from those who are not. There is often a very narrow-and fairly arbitrary-margin. They just happen not to need to be disturbed at night, but during the day the costs may be even higher-the disruption to the family, the impossibility of working-all those issues are possibly just as great for those who will not qualify for the higher rates. It is really important to hang on to that.

Lord Freud: My Lords, this is a really important point. It may very well be that the concern of the House actually boils down to a discomfort with the dividing line between severely disabled and disabled. If that is the case, the way to do it-and I pick up what my noble friend Lord Newton was saying-is not to look at aspect or concrete ratios but at the precise issue that noble Lords are actually worrying about, which is the relationship. I will commit to having a very close look at this. It is clearly tied up with DLA definitions, which are under constant review and are being reviewed.

If we move the children from DLA to PIP, we need to look at this and there will be a real consultation process. I will review this dividing line and look at that very closely, and when we come to the regulations on this, I will report back to noble Lords on exactly what we find. My sense is that this is the real issue underneath all this. I know noble Lords had to find an amendment that had to weave through, to express this concern, so we all know what is happening on a technical basis. Let us go to the real issue. The real issue is: are we getting the dividing line right? People ask me if I am

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listening-I hear what noble Lords are saying; this is what I think noble Lords are saying, and I will go and do something about that.

Baroness Howarth of Breckland: I do not think that is the whole issue that is concerning noble Lords. There is another issue, about the context. If you expect a single mum to get work in order to benefit from universal credit, you should go out on to the highways and byways with these women, as I do, and try to get a job. You need to be part-time, you need to work within certain time constraints, and you need to be able to get specialist childcare if you are going to go out. It is about more than being proportionate, it is about understanding the nature of life when you have a disabled child, however severely along the spectrum that might be, because some behaviour disorders, which sometimes can be assessed as reasonably manageable, can be extraordinarily difficult to get someone else to manage outside your family home. As I said to the noble Lord recently on another point, if you compare the unemployment figures and the numbers of part-time jobs with the number of those women who would like to work getting into those jobs, there is also that contextual issue that I am sure is concerning their Lordships.

Lord Freud: Not just your Lordships-I share those concerns, clearly. One of the things I have been trying to do is to really hone in on the help for people to get them into the right kind of work. We have now substantially rebuilt the payment by results element of Welfare to Work. That is not about saving money; it is about making sure that the support is very individualised for people. We will have the formal national statistics on this later this year, but the anecdotal feedback that I am getting from providers is that that individualisation of support for people is really beginning to work. That is a real issue that needs to be addressed. We need to support people back into the workplace when they can work, but we also need to get severely disabled children, who will move into adulthood still needing to be supported, to this higher rate and not have this cliff edge.

The blunt truth is that if we got rid of this cliff edge and maintained higher levels for less disabled children-that is the set of choices that we are playing with here-the cost would be £200 million a year. When things are better, I can quite imagine any Government being very keen to put money in that direction. However, as noble Lords will know, you get an amendment here and an amendment there and pretty soon the amounts add up in a way that really damages our national finances. We can blame the Treasury if we like, but that is a real constraint. We have already looked at amendments the proposals of which we have totalled up to cost in excess of £5 billion over five years, and just taking that on the chin and continuing to get rid of the cliff edge would cost another £200 million, as I said. Those are the choices. We have done a lot of soul-searching on this, and our view is that it is right and fair to align the extra amounts payable for disabled children and disabled adults.

I will close with two points. First, we are trying with the universal credit to bring coherence and simplicity to our benefit support for people. I cannot tell noble

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Lords how difficult that is to do in practice. I spend every moment of the day when I am not here with your Lordships trying to do that and wrestling with issue after issue. It is very simple; if you are asking someone a set of questions, when do they turn off? How many questions can you ask? You have to simplify the whole system. One thing that I have appreciated more than anything else in the weeks in which we have gone through this Bill is that this House has supported absolutely consistently the introduction of a universal credit. It has understood what we are trying to do and the pressure and the need for coherence and consistency, and I am really grateful for that support. I ask the House please to maintain that support now, especially as we have already voted on this principle.

Finally, I will pick up the point made by my noble friends Lord Newton, Lord German and Lady Thomas that this is a matter for regulations and not for primary legislation. Noble Lords have sent a very strong message to me and to the Government. I will look at this issue and we will be able to discuss it in our debate on the regulations.

4.30 pm

Lord Patel: My Lords, on a point of order, will the Minister confirm that we cannot amend regulations? He has asked us to give them consideration and committed to bringing them back, but whatever he brings back will have to be either accepted or rejected.

Lord Freud: My Lords, I hope that noble Lords by now have got a flavour of how I try to work with them. I listen and I take on board what people say. I will aim to shape the regulations in the light of that. I am more than happy to-

Baroness O'Cathain: I have listened avidly to this debate and been very moved by a lot of it. I also have some experience. I can see that the position is extremely difficult. On the point made by the noble Lord, Lord Patel, about not being able to amend regulations, I should like to ask my noble friend whether he can throw out regulations and put new regulations in their place. I know that we have mixed up concrete and aspic. It is not that regulations are fixed in concrete and cannot be changed-I understand that. However, if we voted saying that the regulations were not appropriate, could we have other regulations?

Lord Freud: That is exactly what happens with regulations-

The Countess of Mar: If the House of Commons throws the regulations out, they can be thrown out; but if we throw them out, the House of Commons can ignore it completely.

Lord Freud: No, my Lords. Without wanting to get into a huge constitutional debate about this, my understanding is that if the House of Lords threw them out, there would at some stage have to be a satisfactory set of regulations that both Houses could

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agree. So it is a very powerful thing to do. Clearly, I would hope never to get into that position, which is why-

Lord McKenzie of Luton: What the Minister says about affirmative regulations is right, but is he aware that it is the stated position of the Conservative Party in this House that it does not vote against affirmative regulations? In recent times we have had several such debates, and the Conservative Party has declined to do this on principle.

Lord Freud: When we were in opposition we certainly did not vote on a fatal basis, which was our policy. If the House feels strongly about a set of regulations and the Opposition do not have such a self-denying ordinance-which I think they do not-they can express their view in a vote on the regulations.

Baroness Hollis of Heigham: My Lords, the Minister is encouraging us to defy all the conventions of the House. Perhaps I may say gently that he really should not go down this path. First, the noble Lord, Lord Patel, is absolutely right: you cannot amend regulations. If you could, you would be in the game of primary legislation, because you would be toing and froing. Equally, if the House of Commons were to pass those regulations and we decided to overturn them, then the non-elected House would be overturning the will of the elected House. Both major parties have respected-I repeat, respected-that convention for the full 20 or so years that I have been in your Lordships' House.

Lord Trimble: Before the Minister replies to that intervention, perhaps I may suggest that we are getting bogged down on the question of amending or rejecting regulations. I thought that the Minister indicated that, before we get to the point of regulations, he will look at this closely, consult people and speak to people. That is where the conversation should be and where the attention should focus at the moment.

Lord Freud: I thank my noble friend Lord Trimble for that. That is the position. I have heard strong arguments here and very great concern. I will talk to noble Lords before we get the regulations out to make sure that they find the regulations acceptable. I give that undertaking now. I beg the noble Baroness to withdraw her amendment.

Baroness Meacher: My Lords, I feel a huge weight of responsibility here. The Minister does not want me to test the opinion of the House, and I understand that, but hundreds of thousands of families all over the country with disabled and severely disabled children are desperate about this issue; I repeat, they are desperate. The pressure of that is difficult to bear. But I do want to say that I respect very strongly the Minister, the noble Lord, Lord Freud, for the huge amount of work that I know he does all the time on working towards a simpler welfare system. He has done a fantastic job on this. But, as he knows, the job of this House is to try to ameliorate the worst effects of legislation, and that is

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what we have done consistently throughout this process. The Minister has generously agreed to take back and think about these issues following the moving speeches that have been made by many noble Lords, but the fact is that we in this House do not have an assurance that anything will happen.

The Minister is under huge pressure from a Secretary of State who is an awfully long way from this. I think that he has little real understanding of what it is to be a poor family with a very disabled child and not able to afford to give to that child what they know it needs. I have concerns about that because we need the Government to understand the enormity of the pressure on these families. I have often said to my own children that I do not think I could have managed it at all because these things are so tough. That is the situation here.

The Minister referred to a cliff edge at the age of 16. The noble Lord in his place beside me referred to a cliff edge at the age of three. The worry is that what the Government are doing is introducing a cliff edge at birth and then at one, two and three, when severe disability hits. Do we want these families to fall off a cliff-and that must be how it feels-when they realise that they have made a lifelong commitment to care for a child but the state withdraws some of its support? That is a big issue for us.

The Minister referred to DLA funding swimming lessons, school holiday clubs and so on. The reality is that DLA does not cover adequately those expenditures, and that is the issue. Families do not have enough money, and it is why 40 per cent of them are in poverty. They need more money if they are to help their children fulfil their potential, whatever that potential may be. The Minister also referred to families being better off in work. I accept that, but the difficulty is that that is being achieved by impoverishing an awful lot of people, some of whom can work-speaking for myself, I support the Government's quest to get more and more people back into work. But when we consider families with disabled children, particularly single parents with disabled children, as others have said, they cannot do this and it is terrible to impoverish them.

That is the dilemma we are facing. I know that the Minister is going to be deeply unhappy with me and I do not like making him deeply unhappy, but I owe it to the families out there to test the opinion of this House. We have to do it.

EU Council

Statement

4.53 pm

The Chancellor of the Duchy of Lancaster (Lord Strathclyde): My Lords, it may now be a convenient moment for me to repeat a Statement made by the Prime Minister earlier this afternoon on the European Council. The Statement goes as follows:

"With permission, I would like to make a Statement on yesterday's informal European Council. Countries right across Europe need bold action to recover their economic dynamism, to get to grips with their debts and to secure growth and jobs for the future, and that was rightly the focus of this Council.

First, we agreed important measures needed to restore Europe's competitiveness. Next we discussed the separate intergovernmental treaty on fiscal discipline in the eurozone. Finally, we issued a statement on Iran, Syria and Burma. Let me take each in turn.

Britain's agenda in Europe is to promote growth, competitiveness and jobs. We have repeatedly said that the best way that the EU can drive growth and create jobs is to complete the single market; to establish trade deals with the fastest growing parts of the world; and to cut the regulatory burdens on business. At this Council, we made important progress on all these issues. We agreed to establish a fully functioning single market in services, where there are still 4,700 professions across Europe to which access is regulated by government; and, in digital, where there are over a dozen separate copyright regimes in what should be one single market, we will take action to secure what should be a fast-growing area right across Europe. Together, these changes in services and digital alone could add more than 6 per cent to EU GDP within 10 years.

We also agreed to complete the energy single market, which has the potential to cut costs for businesses and consumers across Europe. On free trade, we said that:

'2012 should be a decisive year to move ahead on trade agreements with major partners',

such as Japan, India, Canada and the United States, and on regulation we agreed a growth test to ensure,

'that all actions at the European Union level fully support ... growth and job creation'.

We also agreed to reduce regulatory burdens, especially for SMEs and microenterprises, and to complete a patent package to support innovation. This has been discussed in Europe for well over a decade and, finally, we are making decisive progress.

Next, on the eurozone, we want the eurozone to sort out its problems. They are having a chilling effect on our own economy and tackling them is one of the best ways in which we can help secure growth, both here in Britain and right across Europe. As I have repeatedly said, short-term steps must be taken-and taken properly. There was the so-called October package.

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Europe's banks must be recapitalised properly. The uncertainty in Greece must be brought decisively to an end, and the firewall needs to be big enough to deal with the full scale of the crisis and the potential contagion. In the longer term, proper fiscal discipline in the eurozone is clearly an important part of the solution, and something that Britain recognises is necessary.

The question has never been about whether there should be greater fiscal discipline in the eurozone but rather how it should be achieved. I went to the European Council last December prepared to agree a treaty of all 27 countries, but only if there were proper safeguards for Britain. I did not get those safeguards, so I vetoed the treaty. As a result, eurozone countries and others are now making separate arrangements outside the EU treaties for strengthening budgetary discipline, including ensuring that there are much tougher rules on deficits. So, at this Council, 25 EU member states agreed a new treaty outside of the European Union. Britain and the Czech Republic have not signed up, and we will not be taking part.

Let me deal directly with the issue of the institutions. The new agreement sets out roles for the European Commission and the European Court of Justice. While some of those roles are already permitted through existing treaties, there are legal questions about what is planned. As I said, it is in Britain's interests that the eurozone sorts out its problems. It is also in our interests that the new agreement outside the EU is restricted to issues of fiscal union and does not encroach on the single market. The new intergovernmental agreement is absolutely explicit and clear that it cannot encroach on the competencies of the European Union and that they must not take measures that in any way undermine the EU single market. Nevertheless, I made it clear that we will watch this closely and if necessary, we will take action-including legal action-if our national interests are threatened by the misuse of the institutions.

The principle that the EU institutions should act only with the explicit authorisation of all member states remains, so let me be clear: this is a treaty outside the EU. We are not signing it, we are not ratifying it, we are not part of it and it places no obligations on the United Kingdom. It does not have the force of EU law for us, nor does it have the force of EU law for the EU institutions or for the countries that have signed it, and there will be no inner group of European countries distorting the single market from inside the EU treaty. That is the fundamental protection we secured with our veto in December, and that protection remains.

Finally, we also made an important statement on developments in Iran, Burma and Syria. Britain has played a leading role in getting Europe to act together on each of these areas. On Iran, last week all EU countries agreed an unprecedented oil embargo, which shows our determination to keep up the pressure on the regime to turn away from any plans to develop nuclear weapons.

In Burma, Aung Sang Suu Kyi has for years been an inspiration to her people and the world. Britain has supported her at every stage and been at the forefront

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of EU sanctions. Now there are signs of a new moment of opportunity for democracy and we should be prepared to relax these sanctions, but only in stages and in response to reforms. When I spoke to Aung Sang Suu Kyi on Saturday, she emphasised the importance of credible and free by-elections in April. I assure the House that we will be watching them very closely.

On Syria, the Council condemned the continuing violence and repression of the Syrian people. Reports suggest that more than 60 people were killed on the streets of Syria last week alone. In total, more than 5,000 people have been killed, 400 children murdered and tens of thousands of people detained. Today the Foreign Secretary is in New York to support the Arab League's call for Security Council action condemning the repression and supporting a transition of power. All 27 EU members backed that call for UN action, and if the violence does not end we agreed that we will tighten EU sanctions further. Our message is clear: we will stand with the Syrian people. It is time for all members of the UN Security Council to live up to their responsibilities instead of shielding those who have blood on their hands. The killing must stop and President Assad must stand aside.

In conclusion, Mr Speaker, this was an important Council for Britain. On competitiveness, the single market and trade, Britain is setting the agenda. On action to face down dictators and dangerous regimes in Iran and Syria, Britain is leading the way, and by saying no to a new EU treaty we have protected Britain's interests. I commend this Statement to the House".

5.01 pm

Baroness Royall of Blaisdon: My Lords, I am grateful to the noble Lord the Leader of the House for repeating the Statement made by his right honourable friend the Prime Minister in another place.

First, I associate these Benches with the remarks made about Iran, Syria and Burma. On these issues there has been a bipartisan approach and the Government have our full support in the efforts that they are making. However, in relation to the European Union, I am bound to say that I am perplexed. Last month when the Prime Minister came back from Brussels he said, to the dismay of these Benches, that his veto included a veto on the use of EU institutions. That position was reiterated by the Chancellor the day after the summit when he said,

"If we had signed this treaty ... we would have found the full force of ... the European Court, the European Commission, all these institutions enforcing those treaties, using that opportunity to undermine Britain's interests ... We were not prepared to let that happen".

Indeed, the Welfare Secretary made the same points this weekend. Yet it is clear from today's Statement that the European institutions will fulfil their usual role in relation what I would call a new treaty, and the buildings of the European institutions will be used. How can the Prime Minister possibly argue one month that something is a great threat to the national interest and the next that it is a matter of relatively minor significance on which Britain can reserve its position?

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I well understand that some people may be confused or even dismayed by this turnaround. However, on these Benches we are glad.

I am also perplexed that today the Prime Minister talks of a treaty, yet yesterday he said at the press conference:

"There isn't a Brussels EU treaty; it doesn't exist, I vetoed it".

Yet to my mind it seems to have all the attributes of a treaty. I understand that the Foreign Office made extensive diplomatic efforts to persuade other euro-outs not to sign. Fleetingly it seemed that the Poles might lead a significant number in not joining up, but at the end of the day the only country to put itself in the same isolated and powerless position as ourselves is the Czech Republic. Is the Leader of the House satisfied with this abject failure of diplomacy?

It would also seem that no protections have been secured for Britain. The Government say that protections have been secured about discussions on the single market, but what are those protections? What has happened to the list that the Prime Minister circulated at 2 am at the previous European Council? Was this a serious effort to protect UK national interests or a flimsy excuse for not signing the treaty because ratification would have caused aggro and difficulties in the other place?

The treaty says that,

"the Contracting Parties ... take the necessary actions and measures in all the domains which are essential to the good functioning of the euro area".

Then it goes on to list them: fostering competitiveness; promoting employment; and reinforcing financial stability. They sound like single market issues to me. Can the Leader confirm whether the UK will have observer status at the regular meetings of the 25 so that we know what is going on and whether or not the single market is being discussed? If we do not have observer status, who is going to protect the British national interest at these meetings? Who is going to ensure that deals are not made to undermine the single market? I suspect that it will be officials from the European Commission-the much maligned Brussels bureaucrats. I wonder whether the Leader might not think it ironic that the European Commission-for which I once proudly worked but from which I do not receive a pension-will be this Government's greatest ally in defending and improving the single market?

There are now growing fears that the scale of austerity required under the compact will not work. The rating agency Standard & Poor's said that,

In particular, Article 4 demands that countries reduce their debt levels at such a rate that it will make it very hard for them to grow their economies. Does the noble Lord believe that the economic strategy in the fiscal compact will work? Perhaps he thinks it will because it is a mirror image of the Government's own policies, but I suggest that those policies are not working.

Yesterday's summit was supposed to tackle youth unemployment. I wonder what solutions the Government suggested in the light of experience in this country where long-term youth unemployment has doubled over the past year. Will the Government be applying

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to the European Social Fund for the extra money for apprenticeships, support schemes for young business starters and entrepreneurs that is now to be made available? Will they be applying for the new European Investment Bank support for SMEs and infrastructure? Or, by not signing the treaty, have the Government cut Britain off from the extra help that unemployed young people and SMEs need?

On these Benches, we believe that the summit was bad for Britain, for our businesses, for jobs and for families. There is still no solution to the problems of growth in Europe. The Prime Minister's veto that never was has been exposed and Britain now has less influence in the European Union than we have had for a generation. Britain deserves better.

5.07 pm

Lord Strathclyde: My Lords, I wholly understand why the noble Baroness has to trot out this stuff, which she no doubt gets from the shadow Cabinet, but it is far removed from reality. I very much welcome her own welcome and support for our position and indeed Europe's position on Syria, Iran and Burma, but when it comes to the eurozone intergovernmental treaty, she has a fundamental misunderstanding of what has been going on over the past couple of months. What we were seeking to defend in the December European Council were British interests, and that is what we did by vetoing a treaty which we believe would fundamentally impact British interests in a negative way. This treaty does not because we are wholly in favour of the countries of the eurozone, and others, sorting out their own fiscal problems, and have supported them in creating this intergovernmental treaty. Therefore, I do not regard it as a failure of diplomacy at all. Indeed, Article 2 of this treaty demonstrates that the treaty shall not encroach upon the competences of the European Union. That is an important safeguard for us.

The noble Baroness asked about the economic strategy and the fiscal compact and whether or not it will work. Most international commentators now agree-and have done so for some time-with the position that the United Kingdom Government have taken over the past 20 months of austerity. It is true that the countries of the eurozone are now seeing that that is the sensible way forward and believe that you cannot buy your way out of a debt crisis. The fact that the informal council spent so much time talking about the growth strategy, about employment, about exports and about completing trade rounds is an indication that throughout Europe we share similar problems, including those of youth unemployment. However, if you look at the forecast that is being made by most international commentators, you will see that Britain, which has had to take the worst of the medicine first, is in the best position for long-term growth. It would be good if the noble Baroness and her party could support us in that.

5.10 pm

Lord Brittan of Spennithorne: Does my noble friend agree that, whereas, of course, the Government were fully entitled to decline to sign the new treaty, it was also very wise not to try to deny the use of the European Union institutions to those countries that

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chose to sign the treaty? To attempt to do so would have been to risk the use against us of qualified majority voting as the normal legislative tool in areas of vital importance to us, such as financial services, to our great detriment?

Lord Strathclyde: My Lords, it is always nice to welcome a question from my noble friend on this matter. On this occasion, we chose to reserve our position on the treaty, at least in part, because we recognise that there are problems within the eurozone that need to be tackled. We believe that we are using that reservation to watch the operation of the treaty closely and, if necessary, we will be able to take action if our national interests are threatened. However, the principle that EU institutions can be used only when there is permission from all 27 member states has been safeguarded. Of course, we have a number of legal concerns on the use of the institutions but we do not want to hold up the eurozone doing what is necessary to solve the crisis, as long as it does not damage our national interests.

Lord Bilimoria: My Lords, first, in the Statement there is the intention finally to close these free trade agreements with countries such as India. The UK India Business Council, of which I am president, has been asking for this EU-India treaty for years now. Do the Government honestly think that, with the present crisis, it is realistic to be able to conclude such treaties at this time? Secondly, the Government keep talking about wanting fiscal discipline to sort out the eurozone crisis. Can the Government get real? In the growth and stability pact there was no discipline; even Germany did not fulfil the requirements to join the euro when it did so. When are the Government ever going to be able to impose fiscal discipline when there is no sovereign union throughout the united states of Europe? There will never be a united states of Europe. Do the Government think that the Greek crisis will just go away? If Greece defaults, will there be contagion throughout Europe? Are we prepared for that contagion?

Lord Strathclyde: My Lords, the noble Lord asks me a load of questions at the end of his intervention which are not my or the Government's responsibility. They are very difficult questions to answer. We all have to hope that the steps that the eurozone countries are taking are the right ones to prevent the contagion of which he speaks. We hope that they have done that. People like me, who rather oppose a single currency, have pointed out these problems for many years. It is hard to see how a currency union can work without greater political and fiscal union. It may well be that the countries of the eurozone are heading in that direction.

On the noble Lord's first question about international treaties between the EU and other countries, including India, it is, at least in part, because of the state that we find ourselves in and the lack of moving forward on the Doha trade round that I feel confident that the statement made yesterday in Brussels is heading in the right direction. There is a lot of political force behind it and I am sure that the whole House will welcome this strong declaration of coming forward with a long-term treaty between the EU and India.

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Lord Tomlinson: My Lords, does the noble Lord agree that the tone of the Statement, which I am grateful to him for repeating, was rather arrogant when it spoke about Britain "setting the agenda" and "leading the way"? That is the sort of leadership that this country can well do without-isolating ourselves from the mainstream of Europe. Will the Leader of the House also acknowledge that although he spoke about defending our interests, there is a lot to learn from Mrs Thatcher? She never sought to defend our interests by leaving a Council meeting and walking out. The way she defended our interests was to stay and fight for them. I have a specific question to the Minister. When he talks in the Statement about a fully functioning single market in services, is that supposed to include financial services?

Lord Strathclyde: Very much so, my Lords. We want to see the completion of a single market and the digital economy. It is not arrogant to say that the United Kingdom has been at the forefront of the growth agenda. It is Britain that has been pointing out the dangers of overcentralisation, overbureaucratising, and overexpensive institutions that militate against the interests of the free market that will in the long term provide the jobs we need, not just in this country but throughout Europe.

Lord Higgins: My Lords, is my noble friend aware that the Prime Minister is absolutely right not to join the proposed new treaty and to distinguish it from the existing treaty? Is he not also right to say that it is essential for the eurozone to sort out its problems? The problem with doing that has been that it has confused the debt problem with the exchange rate problem. The reality as far as Greece, for example, is concerned is that it is inconceivable that it will become competitive at the present exchange rate, however much it is bailed out. There is therefore no way that these matters will be solved until certainly Greece, and perhaps others-one must hope not-leave the eurozone. It is crucial that if they do so, the period of transition should be as brief as possible. The difficulty is that we do not have available in terms of notes and coins a currency that will enable such countries to leave, quite apart from the dreadful problems there will be in the transition over the need to impose exchange controls, which one must doubt the Greek Government's ability to do. Until that side of things is sorted out, no amount of bailout or fiscal co-ordination will solve the problems of the eurozone.

Lord Strathclyde: My Lords, I welcome my noble friend's words on the principle of the position we took yesterday at the informal Council. As to what he said about the desirability of the eurozone solving its problems, I completely agree and that is very much one of the reasons why what happened yesterday happened. However, some of my noble friend's analysis is not really a matter for me or the British Government, although we wish the euro well. These matters will no doubt be taken up within the eurozone. There are real challenges for countries such as Greece and, within the eurozone, the balance of trade between different countries. They

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have chosen a route along which they wish to try to solve this matter, and we should wish them well in their attempt to do so.

Lord Clinton-Davis: My Lords-

Lord Hannay of Chiswick: My Lords-

Lord Wallace of Saltaire: Shall we hear from the Cross Benches and then Labour? We have not yet heard from the Liberal Democrats. We may go around the Benches and there is plenty of time.

Lord Hannay of Chiswick: I join the noble Lord, Lord Brittan, in saying that the Prime Minister was extremely well advised not to contest the use of the institutions in the context of this intergovernmental agreement. I would only add, gently, that you cannot reserve your position on a decision that you are not a party to.

Can the Minister now answer a question that I have been asking with a certain persistence without getting any answers: what provisions in the intergovernmental agreement are objectionable to the British Government? He has just spoken warmly about Article 2, and I imagine that he could speak quite warmly about most of the other articles, so why are we not joining the agreement? It is a little difficult to understand. Perhaps the Prime Minister let the cat out of the bag when, with a look of some relief on his face-at least it looked like that on my television set-he said, "Nothing to sign. Nothing to ratify"-and, he might have added, "Nothing to make me run the gauntlet of my Back-Benchers".

Lord Strathclyde: My Lords, if those were his motivations, there would be nothing wrong in that. In fact, the Prime Minister made it entirely clear in response to questions and in his Statement on the December Council that his only aim was to preserve British interests. At the December Council, he asked for certain safeguards and those safeguards were not offered. Hence, we have got to the current position.

As the noble Lord knows extremely well, we have a number of legal concerns about the treaty, particularly on the use of the EU institutions, but, as I said, it is in our national interest for the eurozone to solve its problems. That is why we are reserving our position. I know that the noble Lord, Lord Hannay, asks my noble friend Lord Howell questions from time to time. He will have an opportunity to have another go in a couple of weeks' time, when we are having an all-day debate on the European Union.

We will be watching developments very carefully over the next few weeks and months, and if there is any sign that they will encroach, particularly on the single market, we will seek to take appropriate action.

Lord Davies of Stamford: My Lords, it is at least reassuring that the Prime Minister now appears to be conducting our diplomacy in the EU in a cool, calm and reasoned fashion, although it is very worrying that we shall not, apparently, even be in the room as observers when the 25 meet regularly from now on.

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However, I sincerely congratulate the Government on their contribution to the achievement of the single market conclusions of the Council, particularly in relation to energy. I hope that there will be follow-through and implementation.

If Greece defaults, which it may, there may be contagion. If there is contagion, there would be a very serious banking crisis. In those circumstances, it would be extremely expensive for us to bail out our banks. Would it not be much cheaper now to make a more modest contribution to the new financial stability fund, the IMF or otherwise to the firewall which we keep nagging our European partners that they should be putting together without us, up to now, being willing to contribute at all?

Lord Strathclyde: My Lords, it is not my role, nor that of the Government, nor is it appropriate to speculate on the position of Greece. Greece has to make its own decisions on that question. Our view is that it is important that all parties should stick to the deal agreed in October and that all the elements of that package, including the PSI, are finalised and implemented without further delay. We are not contributing directly to more bailouts of the eurozone, as the noble Lord knows. One thing that we agreed earlier through the new ESM is that we are extracting the United Kingdom from having to pay for eurozone bailouts in future. IMF payments are of course an entirely different matter, but we believe that the IMF is there to lend support to a country, not to a currency.

Lord Dholakia: My Lords, this is one Statement on which the Prime Minister and the coalition Government should be congratulated. There is total agreement on matters relating to the agenda on jobs and growth. Does the Leader agree that now that we are winning the argument we should be looking to work very closely with our allies, including Italy and Spain, to spell out a truly ambitious and far-reaching plan for delivering jobs and growth from now through to 2015?

Lord Strathclyde: My Lords, if I may say so, that was an entirely sensible and constructive question from my noble friend Lord Dholakia. We believe that the statement made by the European Union yesterday was an important signal about a change of direction in trying to create a proper market for jobs, services and growth. Of course, we will be working with our allies-not just with the European Commission but with countries such as France, Spain and Italy-so that we can all learn from each other what works, particularly with regard to apprenticeships, and in the long term that will benefit us all.

Lord Richard: My Lords, three or four times this afternoon in making his Statement the noble Lord has referred to the fact that at the December meeting the Prime Minister was forced to cast his veto because he did not get the safeguards that he required to protect British interests. The difficulty is that the Government will not tell us what safeguards he was demanding and, until we know that, we cannot tell whether the veto was sensible. Perhaps the noble Lord could draw

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the veil a little this afternoon. There seems to be an atmosphere of reflective penance on the part of the government Benches today. Can he tell us what safeguards the Prime Minister was demanding that he did not get, as a result of which he felt obliged to cast the veto?

Lord Strathclyde: My Lords, it is always beguiling to be asked questions by the noble Lord, Lord Richard, in that manner. The events of the December Council were in fact quite a while ago and I do not have a list of all the great safeguards that we wanted.

Noble Lords: Oh!

Lord Strathclyde: However, basically we wanted to protect the single market. We also wanted to make sure that we were safeguarded from a financial transaction tax that would have an unfair bearing on Britain within Europe. Unless it was applied on a global scale, we were not going to support it. The noble Lord shakes his head as though I have not been helpful but, if not to safeguard British interests, why else would the Prime Minister have vetoed it?

Lord Willoughby de Broke: My Lords, I want to follow the point made by the noble Lord, Lord Dholakia, in reference to competition. Is not this Council statement just a rehash of the European agenda, which was such a notable failure? Does the Minister agree that, as usual, it is all words and no action? Do not figures of 23 million unemployed in the European Union and 51 per cent youth unemployment in Spain show that the European Union is a total failure for its citizens? Would it not be much better to leave before we get sucked even further into the euro mire?

Lord Strathclyde: My Lords, the views of the noble Lord, Lord Willoughby de Broke, on this are extremely well known. He believes that there should be a referendum in the United Kingdom about leaving the EU or that the United Kingdom should just leave the European Union as soon as possible. That view is not shared by this Government. We think that in the past the EU has gone in the wrong direction but we are hopeful. The noble Lord may not have read the European Commission's statement but I hope that he will take the opportunity to do so. I am glad to see he is indicating that he has read it. I think he should be heartened by much of what was said in it about growth, jobs, deregulation and single markets, which will aid prosperity in the long term.

Lord Trimble: My Lords, my noble friend the Leader of the House has made reference to implementing as soon as possible the matters agreed last October. However, is that realistic? Last October, there was reference to agreeing a private sector reduction of Greek bonds by 50 per cent. There has been no agreement, and apparently officials are now looking for a reduction in value of 70 per cent, although the chance of there being agreement on that is minimal. Other institutions talk about firewalls and contagion. The EFSF was created but has turned out to be a complete damp squib. There is now talk of bringing forward the next measure but it is similar in

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character and is also likely to be ineffective. I appreciate that my noble friend has to be diplomatic but is not the reality that that agenda and those agreements are not going to work with regard to Greece? As my noble friend Lord Higgins said, Greece will have to leave. The euro has been a failure as far as it and other countries are concerned, and the sooner the people who are trying to give that leadership to Europe get their heads round that, the better.

Lord Strathclyde: My Lords, it is not just diplomatic to say that these are issues that Greece and the other countries of the eurozone need to sort out; it is common sense. My noble friend's gloomy view may come to pass, but we should all fear that. There is a chilling effect on the economy already because of the crisis in the eurozone, and it would be considerably worse if there was a real banking problem in the whole of the eurozone and the whole of Europe, which would leak into us. Therefore, we urge the countries of the eurozone to solve their problem. With the intergovernmental treaty, we have given them the best opportunity to do so.